BofA profit surges as it puts housing crisis further behind it

Andrew Tangel

NEW YORK — Bank of America Corp.'s fourth-quarter profit surged as the financial giant continued to work through its hangover from the housing meltdown.

The Charlotte, N.C., bank Wednesday reported net income of $3.4 billion, or 29 cents a share, up sharply from $732 million, or 3 cents, a year earlier, when its bottom line suffered from a more than $10-billion settlement with mortgage giant Fannie Mae.

BofA shares are now at their highest point since May 2010, a few months after Brian Moynihan replaced former Chief Executive Ken Lewis, who had agreed to acquire Calabasas mortgage lender Countrywide Financial Corp. as it skidded toward bankruptcy in 2008. They fell under $5 in December 2011, as expenses related to Countrywide multiplied and some analysts questioned whether Bank of America could survive them.

Borrowers' improving credit quality led the bank to release $1.2 billion set aside for loan losses, up from $900 million in the fourth quarter of 2012. The bottom lines of JPMorgan Chase & Co. and Wells Fargo & Co., which reported earnings Tuesday, were also lifted by reserve releases.

Consumer and business banking profit surged to $2 billion, up from $1.4 billion in the fourth quarter 2012. Investment banking, trading and wealth management also showed strong growth in the quarter.

For all of 2013, BofA said it earned $11.4 billion, up sharply from $4.2 billion the previous year.

Executives said the bank has made significant progress in shedding troubled assets stemming from its ill-fated 2008 acquisition of Countrywide.

"We enter this year with one of the strongest balance sheets in our company's history," Bruce Thompson, the bank's chief financial officer, said in a statement. "Capital and liquidity are at record levels, credit losses are at historic lows, our cost-savings initiatives are on track and yielding significant savings, and our businesses are seeing good momentum."

Bank of America still faces steep legal costs. The bank reported an additional $2.3 billion in litigation expenses in the fourth quarter, more than double the $916 million in such costs a year earlier.

Last year, the bank disclosed that the U.S. attorney's office notified the company that it planned to recommend filing a lawsuit over faulty mortgage investments.

Legal observers have said JPMorgan's record $13-billion regulatory settlement last year could serve as a template for other major banks with lingering exposure from the mortgage crisis.

Although BofA executives did not disclose what led to increased litigation expenses, Thompson said the bank had put many of its problems behind it.

"As we go into 2014, we feel like we've made great progress in cleaning some things up," he said in a conference call with reporters. "We still have some additional work to do as we go into '14"